The Good Oil: Energy firms wary of federal uncertainty

Australia’s oil and gas companies have spent more than their fair share of time in Canberra over recent years thanks to the lengthy debates over emissions trading and more recently resources taxation. And it’s a situation that is unlikely to change drastically regardless of which side of politics emerges victorious next month.

Industrial relations and emissions trading are shaping as two key issues for the election, and the oil and gas industry is heavily exposed to both.

Don’t expect to hear much from any of the companies over the duration of the campaign, as they recognise there’s little to be gained by publicly speaking out during the election campaign.

But once the new government is in place the next resources minister can expect to see a queue of companies at his door early in the peace.

Arguably the most crucial issue for the sector right now is industrial relations.

With over a dozen liquefied natural gas projects representing over $200 billion of new investment either being considered or under construction, industrial relations is going to become a topic of ever increasing significance.

Right now, Australia’s long promised wave of LNG development is still in its early stages, with
Woodside
’s Pluto project and the Chevron-led Gorgon development in Western Australia the only two projects yet in construction.

But while the competition for skills is only going to get worse, Pluto’s construction has already been set back by at least two bouts of strike action – the first of which was found to be illegal and the second of which led to a court ordering the striking workers back to work.

Related Quotes

Company Profile

As more projects get commissioned, the likelihood of further such ructions will only increase.

The energy sector were vocal participants in
Kevin Rudd
’s emissions trading debate, which is likely to be revived again in the event
Julia Gillard
wins the election.

Origin Energy
and
AGL Energy
are both eager to see a carbon price introduced to shore up their pipelines of renewable energy projects, while the large Australian gas reserves within companies like Origin, Woodside and
Santos
could benefit under a carbon tax by becoming more price competitive against higher-emission coal.

Also on the topic of the environment, the environmental impact of Queensland’s budding coal seam gas-to-LNG sector has come under increased focus in the past week.

The move by federal environment minister
Peter Garrett
to delay his decision on whether to approve Santos’ Gladstone and BG Group’s Queensland Curtis LNG projects caught many by surprise, not least of all the companies themselves.

Queensland’s Labor government, which had already given both projects the all-clear and which has been banking on LNG as the next leg in the state’s economic growth, were shocked by the decision. And federal treasurer
Wayne Swan
came out with a statement reiterating his support for the sector within minutes of Garrett’s decision being made public.

There had been widespread expectations that the two projects would be sanctioned by Garrett before the election was called, which would have cleared BG at least to make a final investment decision on its $20 billion project during the election campaign.

With two marginal federal electorates, Flynn and Dawson, directly affected by the investment, Labor could have been gifted an opportunity to demonstrate its job-creation credentials.

But with Garrett holding serious concerns about the long term impact of the projects on the Great Artesian Basin, it’s an opportunity that will have to wait until after the election.

Observers are confident that the two projects will eventually be approved, albeit perhaps with strict conditions attached.

While
Prime Minister Gillard
would like to think that the damaging tax debate is well and truly behind her, there remains a small but vocal portion of the oil and gas sector that is determined not to let its concerns about the new tax regime go unheard.

It was the junior oil and gas players who were forgotten in the tax compromise, with the minnows being slugged with the full 40 per cent tax rate as well as losing their prized exploration rebate. To borrow the naffest line from Rudd’s short tenure in the top job, they got anything but “a fair shake of the old sauce bottle".

While they lack the clout of the big miners, the juniors will be kicking and screaming to be heard over the coming weeks and months.

As for who will be the federal resources minister in the new government, the oil and gas sector would appear to be in a win-win situation.

Both the incumbent minister
Martin Ferguson
and his Liberal shadow,
Ian Macfarlane
, who was resources minister in the last six years of the Howard government, are well respected within the industry.